US natural gas rigs post longest streak of weekly gains since 2010

By LYNN DOAN and RICHARD STUBBE
Bloomberg

Rigs targeting natural gas in the US rose for the fifth straight week, capping the longest streak of gains since 2010, amid higher futures prices and growing pipeline capacity.

Gas rigs climbed by two to 340, the most since March, data posted on Baker Hughes Inc.’s website show. The oil count jumped by nine to 1,584, the Houston-based field services company said. Total rigs rose to the highest since August 2012.

Rigs drilling for gas are rising from a 21-year low as pipeline capacity to carry the fuel out of fields such as the Marcellus formation in the eastern US rises amid higher futures prices.

The rebound is abating a switch to more profitable oil plays that has persisted for the last decade as drillers use hydraulic fracturing and horizontal drilling to draw record volumes of crude from US shale formations.

“We can safely say now that we’ve seen the bottom in the gas rig count, and I’d imagine we’ll go up to 350 rigs if prices rise, and maybe even if they don’t,” said James Williams, president of WTRG Economics.

The total rig count has almost doubled from five years ago amid booming production in shale formations from North Dakota to Texas. The increase has raised domestic crude production to the highest level in 28 years, shrinking imports to the US.

Permian, Utica

About 100 rigs drilling horizontally have been added in major plays such as the Permian Basin in Texas and New Mexico and the Utica shale of the eastern US since the beginning of the year, “and we expect activity to increase further in coming quarters,” Alberta-based investment dealer Peters & Co. said in an e-mailed research note, estimating that total rigs on US land will reach about 1,850 this year.

Natural gas futures have climbed 6.1% in the past year, jumping 5.8% in August alone. Gas for October delivery fell 2.6 cents to settle at $3.793/MMBtu today on the New York Mercantile Exchange.

US gas stockpiles rose 79 billion cubic feet to 2.709 trillion in the week ended Aug. 29, according to the Energy Information Administration.

The Marcellus formation added two rigs this week drilling horizontally for gas, boosting the count to 76, the highest since May, according to Baker Hughes data. The Mississippian in Kansas also gained two to four. A vertically drilling gas rig appeared in the oil-rich Permian Basin of Texas and New Mexico for the first time in four weeks.

Transco Pipeline

Williams began on Sept. 3 to solicit interest in an expansion of the Transco interstate pipeline to deliver gas from the western Marcellus and Utica to as far south as Mississippi. Dominion Resources was chosen to build a 550-mile gas line that would bring the fuel to North Carolina from the Utica and Marcellus.

Gas rigs made up 17.7% of the total US count this week, the biggest share since March 21.

Oil production was little changed in the seven days ended Aug. 29 at 8.63 million bpd after rising a week earlier to the highest level since 1986, Energy Information Administration data show. Oil supplies dropped 905,000 bbl to 359.6 million.

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